Investor lending recovers

The Reserve Bank’s residential mortgage lending statistics for December 2015 are out and the story they tell is complex.

Total new bank lending came to $6 billion in December, according to the RBNZ data.

While this was down on the total lending recorded in November, it was significantly up on total lending in October.

The October lending figure was down to $5.8 billion, from a record $6.5 billion in September.

This suggested the new tax measures, which came into force on October 1, and the looming changes to loan-to-value (LVR) ratios were having an impact. 

But in November, which was the month the new LVR ratios came into force, total new lending bounced back up to $6.4 billion.

The December figure indicates an ongoing recovery from the drop in October.

However, the new LVR ratios restrict the lending banks can do to people purchasing investment properties in Auckland with less than 30% equity.

In Auckland, no more than 10% of bank lending can now go to borrowers with deposits of under 20% - but, around the rest of New Zealand, that limit has gone up to 15%.

While total lending has trended up since the dip in October’s data, the RBNZ data does not have a regional breakdown.

This means it is possible that, although lending overall may be up, it may be dispersed around New Zealand more rather than focused on Auckland. 

Of the new lending in December, investors accounted for $2 billion, which was approximately a third of the lending total.

This figure was down on the November figure of $2.1 billion, but up on the $1.7 billion lent to investors in October.  

However, lending to both first home buyers and other owner-occupiers both followed the same trend: down in October, up in November and then slightly down in December.

Investors’ share of higher than 80% LVR lending in December came to $42 million. This was down on November’s $53 million, but significantly up on October’s $25 million.

The investors’ figure was significantly less than the amount of higher than 80% LVR lending that went to first home buyers ($211 million) and other owner-occupiers ($253 million).

In fact, other owner-occupiers – who were, again, the biggest group of borrowers in the total lending pool – are the only borrower group where higher than 80% LVR lending has consistently trended upwards, with no dip in October.

The RBNZ data also breaks down the total lending to investors into two categories: higher than 70% LVR lending and less than 70% LVR lending.

Higher than 70% LVR lending to investors came to $687 million. This was slightly down on the $688 million loaned in November, but significantly up from October’s $549 million.

The bulk of lending to investors was less than 70% LVR lending. In December, it came to $1.3 billion.